DP117 | Protection, Economic War and Structural Change: The 1930s in Ireland

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The paper describes the insights which trade theory can provide into economic developments in Ireland during the 1930s. First, a version of Ronald Jones's "specific factors" model is applied to the period after 1932, when a policy which combined industrial tariff protection and controls on capital inflows was imposed by the newly-elected De Valera government. It is shown that such a policy mix was inconsistent if the aim of policy was employment creation. The controls on capital inflows were ineffective in practice employment. This ineffectiveness benefitted, although it decreased welfare. The specific factors model is then developed, along Gruen-Corden lines, to allow for the effects of the government's "protillage" policy on the agricultural sector. In a separate section, we apply the standard partial equilibrium analysis of the gains and losses from tariffs to the so-called 'economic war' between Ireland and Britain (1932-8). The outcome tentatively supports the claim that Ireland 'did not lose' this war.